The Top Line
Stocks had their best day in months yesterday on hopes that the U.S.-Iran war could be ending soon — but nothing is confirmed yet. The economy is still growing, but the war's impact on oil prices is the biggest threat to your wallet right now.
We are operating in a transitional macro regime defined by geopolitical shock overlay on an otherwise late-cycle expansion—with underlying economic activity remaining resilient but subject to accelerating uncertainty from the U.S.-Iran war and its stagflationary implications. Manufacturing activity has now expanded for three consecutive months, with the ISM Manufacturing PMI printing 52.7 in March, up from 52.4 in February, while the broader economy has grown for 17 consecutive months. At the same time, the labor market is cooling at the margin: ADP private payrolls added only 62,000 jobs in March—above the 40,000 consensus but concentrated almost entirely in small businesses—and February JOLTS showed hiring falling to 4.8 million, its lowest rate since the COVID reopening. The dominant structural wildcard is the Hormuz closure: with Brent crude settling near $105 after briefly threatening $115 and Goldman Sachs estimating a $14–18 per barrel geopolitical risk premium still embedded in prices, the macro outlook hinges as much on diplomatic resolution as it does on domestic data.
Inflation
Before the Iran war started, inflation — the rate at which prices rise — was actually behaving pretty well. The latest official report showed prices up 2.4% from a year ago, close to the Federal Reserve's 2% target. The problem is that oil prices surged more than 60% during March because the Strait of Hormuz, a narrow waterway that carries about one-fifth of the world's oil, has been effectively closed since the war began. That means the next inflation report, due April 10th, could show a sharp jump — some economists are forecasting 3.2% to 3.5%. If that happens, the Fed — which controls borrowing costs for mortgages, car loans, and credit cards — is likely to keep rates higher for longer.
Key Takeaway
Interest rates are likely to stay where they are through the summer — and possibly longer — because the war is pushing energy prices up fast.
The most recent inflation data reflects the pre-war baseline, which makes it simultaneously useful and stale. February CPI printed exactly in line with consensus at 2.4% year-over-year, with core CPI at 2.5%—its lowest level since March 2021. Monthly readings were 0.3% headline and 0.2% core. Shelter, the dominant CPI component at roughly 36% of the basket, rose just 0.1% on rent in February, the smallest monthly increase since January 2021, signaling that the disinflation in housing is finally becoming meaningful. Core PCE, the Fed's preferred gauge, sat at 3.06% as of January 2026, meaningfully above the 2% target and still elevated by sticky services and healthcare components.
The critical analytical caveat is that these readings predate the Iran war's energy shock entirely. Brent crude surged more than 60% during March—its largest monthly gain since at least 1988—and WTI settled at $101.38 per barrel by month-end even after Tuesday's peace-signal pullback. Goldman Sachs estimates the geopolitical premium alone at $14–18 per barrel, and if energy prices remain elevated, the Cleveland Fed's nowcasting model and sell-side estimates suggest March CPI (due April 10) could print between 3.2% and 3.5% year-over-year, a significant acceleration that would complicate the Fed's posture materially. Tariff pass-through continues to exert upward pressure on goods inflation, with apparel seeing a 1.3% monthly spike in February and further tariff effects still working through supply chains. Moody's Analytics estimates that a technical quirk from the fall government shutdown is suppressing reported CPI by approximately 0.3 percentage points, meaning underlying inflation is likely running closer to 2.7% even on the old data.
The Federal Reserve held the federal funds rate steady at 3.50%–3.75% at its March 17–18 meeting—its second consecutive hold—and the statement acknowledged that "inflation remains somewhat elevated." Markets are pricing near-zero probability of a cut at the May 6–7 FOMC, and the first fully priced reduction has shifted to September per CME FedWatch. If the March CPI print confirms the energy-driven reacceleration, even that September timeline becomes tenuous. The Fed faces a genuine stagflationary bind: slowing labor market momentum argues for accommodation, but oil-driven headline CPI acceleration argues for patience—or worse, a hawkish pivot. This policy tension is the central macro risk for the next 60–90 days.
Key Takeaway
The Fed is on hold through at least May, with September as the earliest credible cut date. Core PCE at 3.06% and pre-war headline CPI of 2.4% are already above target; an energy-driven March print of 3.2–3.5% would push rate cut expectations into 2027. Financial conditions have tightened meaningfully since the conflict began, with elevated oil acting as a de facto tax on consumption.
Risk and Positioning
Markets were in relief mode yesterday — not because anything was actually resolved, but because there is now a chance the war could end. The market's fear gauge (VIX) dropped sharply but still sits at 25, which means investors are still cautious — a calm market typically runs closer to 15. Stocks are down about 5% since the start of the year, and almost every sector finished March in the red. Yesterday's big gains were largely driven by investors buying back shares they had recently sold — what traders call a short-covering rally — which tends to fade if good news does not keep coming. Tonight, President Trump is scheduled to address the nation at 9 PM Eastern on the Iran war, and that speech is the single most important thing markets are watching right now.
Key Takeaway
Yesterday's rally was real but fragile — it depends entirely on whether peace talks follow through.
Tuesday's session delivered the best single day for U.S. equities since May, driven entirely by geopolitical sentiment rather than fundamental repricing. The S&P 500 surged 2.91% to 6,528.52, the Dow added 2.49%, and the Nasdaq led with a 3.83% gain—all fueled by unconfirmed reports that Iranian President Pezeshkian expressed willingness to end the war with security guarantees, combined with Trump stating he believes the conflict will end soon and that he is willing to halt hostilities even if the Strait of Hormuz remains partially shut. This is a risk-on session with an asterisk: the rally is predicated on geopolitical optionality, not earnings revisions or economic reacceleration. The VIX collapsed 17.5% to 25.25—meaningful relief, but a reading of 25 still prices in approximately 1.6% daily moves and is not consistent with complacency. Critically, 10 of 11 S&P 500 sectors finished March in negative territory; Industrials lost roughly 10% in the month alone.
Equity positioning reflects the conflict's damage more clearly than Tuesday's session. The S&P 500 remains down 4.63% year-to-date and 6.77% below its January 28 all-time high of 7,002. Technology has been particularly hard-hit since the war began on February 28, with XLK rallying more than 4% on Tuesday alone—suggesting the sector was deeply oversold relative to its earnings trajectory. Nvidia gained 5.6% and Microsoft 3.1%, consistent with a short-covering rally rather than organic accumulation. Forward P/E on the S&P 500 has compressed from roughly 22x at the January peak toward 20x at current levels, partially unwinding the valuation excess but leaving equities still expensive relative to a 4.31% risk-free rate. The Russell 2000 gained 3.41% on Tuesday, its best day in weeks, but remains the most vulnerable index to a re-escalation given small caps' higher domestic revenue concentration and tighter financing conditions.
Credit markets have been a more honest signal of stress throughout March. High yield spreads have widened materially as oil-driven inflation pressures squeeze margins and uncertainty spikes the cost of capital for lower-rated borrowers. Investment grade has been more resilient, benefiting from flight-to-quality within the credit complex, but spread widening even in IG reflects tighter financial conditions. Gold, which has experienced extreme volatility—down roughly 17% as energy costs spiked and the dollar benefited from safe-haven demand—staged a modest recovery to approximately $4,703 per ounce on Tuesday, still well below February highs. The DXY finished near 100.22, slightly softer on peace-deal optimism, which partially explains the commodity relief rally. The stocks that led Tuesday's move—airlines (UAL +7.8%), cruise lines (CCL +7.8%), semiconductors—are precisely the names most battered by the war, confirming the session as a relief trade rather than a broad re-rating.
Key Takeaway
Implied volatility (VIX 25.25) remains elevated relative to pre-conflict levels below 15, and the equity rally is geopolitical optionality, not fundamental repricing. Ceasefire probability on Polymarket sits at 48% for April 30—a coin flip. A failure to reach an agreement could see Brent re-test $115–$120 and VIX spike back above 30, while a confirmed ceasefire would likely unlock a 5–8% additional equity rally.
Sector and Cross-Asset Analysis
Tech companies led yesterday's gains, with the broad tech sector rising more than 4% as investors bet that an end to the war would cool inflation and allow the Fed to cut rates eventually. Airlines and cruise lines each jumped close to 8% — those companies had been hammered by surging fuel costs, so any peace news hits them like a shot of adrenaline. Oil and gas companies, which had been one of the few bright spots during the conflict, gave back some gains as crude oil prices pulled back from near $115 to roughly $105 per barrel. Gold, which people often buy as a safe haven when they are worried, has been whipsawed throughout March and sits well below its February highs as the dollar fluctuated sharply. The key thing to understand: almost all of these moves are reactions to war headlines, not to company earnings or economic fundamentals.
Key Takeaway
Tech and travel stocks surged on peace hopes — but if talks collapse, those same stocks are the most vulnerable to selling off.
Tuesday's sector leadership was an almost perfect inverse of the prior month's damage map. Technology (XLK +4%+), Consumer Discretionary, and Communication Services led the session as war-battered growth names benefited from the peace-deal optionality. Travel, leisure, and transportation—among the hardest-hit sectors since the Hormuz closure disrupted aviation fuel costs and supply chains—staged some of the largest individual stock gains, with airlines and cruise lines each gaining close to 8%. The lone major laggard was Constellation Energy, which fell more than 7%, reflecting profit-taking in the defensive energy complex that had served as a war hedge throughout March. This single-session reversal in sector leadership does not constitute a regime change; it is a volatility event driven by headline risk, and investors should be skeptical of chasing the rotation without confirmation of a credible ceasefire framework.
Cross-asset dynamics on Tuesday told a coherent if fragile story. Equities rallied, Treasuries caught a modest bid (10Y yield falling 3bps to 4.31%), oil pulled back sharply to around $101–$105 on Brent, and the dollar softened slightly—all consistent with a de-escalation trade. However, the 10Y yield finishing at 4.31% is instructive: the bond market is not yet pricing a Fed cut acceleration, and the 10Y weekly average for March came in at 4.38%—the highest since July 2025. The 2s10s spread remains in positive territory, consistent with late-cycle dynamics and a market that still fears re-escalation could force the Fed's hand on the hawkish side rather than the dovish one. Commodities beyond crude were mixed: aluminum has surged roughly 10% since the conflict began as Iranian attacks on Middle Eastern producers disrupted supply, and agricultural commodity risks remain elevated given the conflict's impact on fertilizer supply chains. Gold remains well off its highs but has begun to stabilize as the dollar softened.
International market performance on Tuesday confirmed the global nature of the relief trade. Asian equities were mixed to modestly positive, with Japan's Nikkei nearly flat and Australia's ASX 200 gaining 0.86%. European markets opened higher Wednesday, reflecting the same peace-deal optimism. However, Asian markets had pared significantly from session lows—South Korea's Kospi had initially dropped nearly 4% before recovering to a 1.86% loss—a reminder that international investors remain deeply uncertain about the conflict's resolution timeline. Equal-weight versus cap-weight performance remains the internal market dynamic to watch domestically: if the peace rally broadens into genuine cyclical participation and small-cap leadership, it would signal more durable risk appetite; if it fades back to mega-cap defensive positioning, the regime-shift narrative loses credibility.
Key Takeaway
Sector leadership on Tuesday was a short-covering relief trade concentrated in war-damaged growth names—tech, travel, and semis—not evidence of a sustainable rotation. March ended with 10 of 11 S&P sectors negative on the month, Industrials down ~10%. Confirmation of a durable ceasefire is required before positioning toward cyclicals, small caps, and international equities carries conviction.
Economic Data & Events
Today's Calendar
- 6:00 AM MT — JOLTS Job Openings (measures how many jobs employers are trying to fill) — Moderate Impact
February result: 6.9 million openings — little changed from prior month
- 6:15 AM MT — ADP Jobs Report (an early read on private-sector hiring) — High Impact
March result: +62,000 jobs added — above expectations but growth concentrated in small businesses
- 8:00 AM MT — ISM Manufacturing Index (measures whether U.S. factories are growing or shrinking) — High Impact
March result: 52.7 — above 50 means expansion; this is the third straight month of growth
- Tonight, 7:00 PM MT — Trump National Address on Iran War — High Impact
The White House says the president will give an update; markets will react immediately to any ceasefire signal
Today's economic data is actually positive — factories are growing and hiring was better than expected. But all of it takes a back seat to tonight's presidential address on Iran. A clear path toward ending the war could extend yesterday's rally into tomorrow; any sign of escalation could reverse it quickly. The bigger data event this week is Friday's official jobs report, which will give a fuller picture of the labor market's health.
Key Takeaway
Trump's Iran address tonight is the most important market event of the week — it could set the tone for the rest of April.
Today's Calendar
- 8:00 AM MT — ISM Manufacturing PMI (March) — High Impact
Actual: 52.7 | Previous: 52.4 | Consensus: ~52.0
- 6:15 AM MT — ADP National Employment Report (March) — High Impact
Actual: +62K | Previous: +66K | Consensus: +40K
- 6:00 AM MT — JOLTS Job Openings (February) — Moderate Impact
Actual: 6.9M (little changed) | Previous: ~7.0M
- All Day — Trump National Address on Iran War (~7:00 PM MT) — High Impact
White House confirmed 9 PM ET address; Trump expected to reaffirm intent to end war within three weeks.
Week Ahead
Friday's March Nonfarm Payrolls report (April 3) is the week's marquee data event, with consensus expecting ~150K–170K; a weak print could reignite stagflation fears. The April 10 CPI report is the next major inflation catalyst, expected to show the first energy-shock impact. Trump's national address tonight on Iran is the week's highest-stakes binary event—a credible ceasefire signal would extend Tuesday's rally; a hardening posture would reverse it.
What We're Watching
Iran Ceasefire Resolution
Trump's April 1 national address is the nearest-term binary. A credible peace framework unlocks 5–8% additional equity upside and a $20–30 drop in Brent; a hardened posture re-tests $115–120 crude and VIX above 30. Polymarket prices a 48% ceasefire probability by April 30—watch for Iranian Foreign Ministry confirmation or denial.
Energy Inflation Pass-Through
Brent above $100 for 30+ days will fully embed in March CPI (due April 10), with consensus nowcasts pointing to 3.2–3.5% headline YoY—a significant acceleration from February's 2.4%. A print above 3.5% would effectively close the door on any 2026 Fed cuts and could require a hawkish policy pivot.
Labor Market Deterioration Signal
Friday's NFP (April 3) is critical: ADP's 62K March print was above consensus but concentrated in small business and healthcare, with large employers shedding jobs. A sub-100K NFP would confirm labor market deceleration and put the Fed in a genuine stagflationary bind—slowing growth combined with accelerating energy-driven inflation.
Equity Valuation Sustainability
The S&P 500 at ~20x forward P/E trades at a thin equity risk premium against a 4.31% 10Y yield. Tuesday's relief rally was short-covering, not multiple expansion. Sustained upside requires either a confirmed ceasefire (energy disinflation) or an earnings acceleration—neither is yet in evidence. Watch equal-weight vs. cap-weight divergence as the key breadth confirmation signal.
The Bottom Line
Yesterday was a great day for stocks, but it was built on an unconfirmed peace signal — not hard facts. Watch tonight's presidential address: a credible path to ending the war is the one thing that could turn this relief rally into a real recovery.
Treasuries are holding near 4.31% on the 10Y with modest demand on the peace-signal bid, though the weekly average of 4.38% for March signals that the bond market is not pricing in imminent Fed accommodation—yields are range-bound between 4.25% and 4.50% absent a confirmed ceasefire or a dramatically weak payrolls print. Equity internals improved sharply Tuesday but remain structurally fragile: the S&P 500 is still 4.63% below its year-start level, and breadth has been artificially compressed by war-driven sector damage rather than fundamental deterioration. Today's session will be dominated by Trump's 9 PM ET national address on Iran—futures traders should expect elevated intraday volatility as markets price both outcomes in real time. Near-term resistance for the S&P sits at 6,600–6,650, with support at 6,350–6,400; a credible ceasefire announcement could challenge the 6,700 level, while a re-escalation signal would test the lower bound.
Disclosure — AI-Assisted Content & Regulatory Notice
This briefing was drafted with the assistance of artificial intelligence tools. All content has been reviewed and approved by Thomas MacPherson, Investment Adviser Representative (Series 65) and Chief Compliance Officer, River Rose Financial, LLC, prior to publication. AI systems may produce errors, omissions, or outdated information; readers should independently verify data.
Market Currents does not constitute an investment advisory relationship, does not create a fiduciary duty, and does not include personalized investment advice. Subscribers should not rely on Market Currents as a substitute for individualized financial advice. This briefing is for informational purposes only. Market conditions change rapidly; all data and projections are subject to revision without notice.
River Rose Financial, LLC is a registered investment adviser with the State of Colorado. Registration does not imply a certain level of skill or training. Past performance is not indicative of future results. All investment strategies involve risk, including possible loss of principal.
